"I believe that nothing can be greater than a business, however small it may be, that is governed by conscience; and that nothing can be meaner or more petty than a business, however large, governed without honesty and without brotherhood."
- William Hesketh Lever
Transparency and accountability are the two basic tenets of Corporate Governance. At Hindustan Unilever, we feel proud to belong to a Company whose visionary founders laid the foundation stone for good governance long back and made it an integral principle of the business, as demonstrated in the words above.
Responsible corporate conduct is integral to the way we do our business. Our actions are governed by our values and principles, which are reinforced at all levels within the Company. At Hindustan Unilever, we are committed to doing things the right way which means taking business decisions and acting in a way that is ethical and is in compliance with applicable legislation. Our Code of Business Principles is an extension of our values and reflects our continued commitment to ethical business practices across our operations. We acknowledge our individual and collective responsibilities to manage our business activities with integrity. Our Code of Business Principles inspires us to set standards which not only meet applicable legislation but go beyond in many areas of our functioning.
To succeed, we believe, requires highest standards of corporate behaviour towards everyone we work with, the communities we touch and the environment on which we have an impact. This is our road to consistent, competitive, profitable and responsible growth and creating long term value for our shareholders, our people and our business partners. The above principles have been the guiding force for whatever we do and shall continue to be so in the years to come.
The Board of Directors ('the Board') is responsible for and committed to sound principles of Corporate Governance in the Company. The Board plays a crucial role in overseeing how the management serves the short and long term interests of shareholders and other stakeholders. This belief is reflected in our governance practices, under which we strive to maintain an effective, informed and independent Board. We keep our governance practices under continuous review and benchmark ourselves to best practices across the globe.
THE BOARD OF DIRECTORS
The Board of Directors is entrusted with the ultimate responsibility of the management, general affairs, direction and performance of the Company and has been vested with requisite powers, authorities and duties. The Management Committee of the Company is headed by the Managing Director and Chief Executive Officer and has business / functional heads as its members, which looks after the management of the day-to-day affairs of the Company.
The Board comprises such number of Non-Executive, Executive and Independent Directors as required under applicable legislation. As on date of this Report, the Board consists of eight Directors comprising one Non-Executive Chairman, four Independent Directors and three Executive Directors. The composition of the Board represents an optimal mix of professionalism, knowledge and experience and enables the Board to discharge its responsibilities and provide effective leadership to the business. The positions of the Chairman of the Board and the Chief Executive Officer of the Company are held by separate individuals, where the Chairman of the Board is a Non-Executive Director. The detailed profiles of the members of the Board of Directors are provided on page nos. 26 to 29 of this Annual Report.
During the year, Dr. R. A. Mashelkar, Independent Director of the Company, upon attaining the age of seventy years, retired from the Board of the Company by not offering himself for re-appointment at the Annual General Meeting, in accordance with the then prevailing policy of the Company.
Mr. Nitin Paranjpe, consequent to his elevation as President, Home Care for Unilever, stepped down as the Managing Director and Chief Executive Officer of the Company. Mr. Sanjiv Mehta was appointed as the Managing Director and Chief Executive Officer succeeding Mr. Nitin Paranjpe. Mr. Sanjiv Mehta was appointed as an Additional Director on the Board with effect from 1st October, 2013 and as the Managing Director and Chief Executive Officer with effect from 10th October, 2013.
None of the Directors is a member of the Board of more than fifteen Companies or a Member of more than ten Board-level Committees or a Chairman of more than five such Committees.
Appointment and Tenure
The Directors of the Company are appointed by Members at the General Meetings. In accordance with the Articles of Association of the Company, all Directors, except the Managing Director, step down at the Annual General Meeting each year and, if eligible, offer themselves for re-election. The Managing Director of the Company is appointed for a term of five years as per the requirement of the statute. The Executive Directors on the Board serve in accordance with the terms of their contract of service with the Company.
As regards the appointment and tenure of Independent Directors, following is the policy adopted by the Board:
• The Company has adopted the provisions with respect to appointment and tenure of Independent Directors which is consistent with the Companies Act, 2013.
• The Independent Directors will serve a maximum of two terms of five years each.
• In the transition to the Companies Act, 2013, which is effective 1st April, 2014, those Independent Directors who have already served for ten or more years will serve for a maximum period of one term of five years. This is consistent with the provisions of Companies Act, 2013. In effect, the transition will be managed by re-appointing such Independent Directors for a period of one more term that does not exceed five years.
• With the above changes, the Company would not have any upper age limit of retirement of Independent Directors from the Board and their appointment and tenure will be governed by provisions of the Companies Act, 2013.
Our definition of 'Independence' of Directors is derived from Clause 49 of the Listing Agreement with Stock Exchanges and Section 149(6) of the Companies Act, 2013. Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed, all Non-Executive Directors other than the Chairman are Independent in terms of Clause 49 of the Listing Agreement and Section 149(6) of the Companies Act, 2013. Mr. Harish Manwani, who is the Chief Operating Officer and a member of the Unilever Leadership Executive (ULE) of the parent Company, is not considered as an Independent Director.
The Board meets at regular intervals to discuss and decide on Company / business policy and strategy apart from other Board business. The Board / Committee Meetings are pre-scheduled and a tentative annual calendar of the Board and Committee Meetings is circulated to the Directors well in advance to facilitate them to plan their schedule and to ensure meaningful participation in the meetings. However, in case of a special and urgent business need, the Board's approval is taken by passing resolutions by circulation, as permitted by law, which is confirmed in the subsequent Board meeting.
The notice of Board meeting is given well in advance to all the Directors. Usually, meetings of the Board are held in Mumbai. The Agenda of the Board / Committee meetings is set by the Company Secretary in consultation with the Chairman and the Chief Executive Officer of the Company. The Agenda is circulated a week prior to the date of the meeting. The Agenda for the Board and Committee meetings includes detailed notes on the items to be discussed at the meeting to enable the Directors to take an informed decision.
During the financial year ended 31st March, 2014, seven Board meetings were held on 8th and 9th April, 2013, 29th April, 2013, 3rd May, 2013, 26th July, 2013, 26th October, 2013, 27th January, 2014 and 11th March, 2014. The maximum interval between any two meetings was well within the maximum allowed gap of 120 days.
The normal business of the Board includes:
• framing and overseeing progress of the Company's annual plan and operating framework;
• framing strategies for shaping of portfolio and direction of the Company and for corporate resource allocation;
• reviewing financial plans of the Company;
• reviewing quarterly and annual business performance of the Company;
• reviewing the Annual Report and accounts for adoption by the Members;
• reviewing the progress of various functions and businesses of the Company;
• reviewing the functioning of the Board and its Committees;
• reviewing the functioning of the subsidiary companies;
• considering and approving declaration / recommendation of dividend;
• reviewing and resolving fatal or serious accidents or dangerous occurrences, any materially significant effluent or pollution problems or significant labour issues, if any;
• reviewing the details of significant development in human resources and industrial relations front;
• reviewing details of foreign exchange exposure and steps taken by the management to limit the risks of adverse exchange rate movement;
• reviewing compliance with all relevant legislations and regulations and litigation status, including materially important show cause, demand, prosecution and penalty notices, if any;
• reviewing Board remuneration policy and individual remuneration packages of Directors;
• advising on corporate restructuring such as merger, acquisition, joint venture or disposals, if any;
• appointing Directors on the Board and Management Committee;
• reviewing Corporate Social Responsibility policy of the Company and monitoring implementation thereof;
• reviewing details of risk evaluation and internal controls;
• reviewing reports on progress made on the ongoing projects;
• monitoring and reviewing Board Evaluation framework.
The Company Secretary is responsible for collation, review and distribution of all papers submitted to the Board and Committees thereof for consideration. The Company Secretary is also responsible for preparation of the Agenda and convening of the Board and Committee meetings. The Company Secretary attends all the meetings of the Board and its Committees, advises / assures the Board on Compliance and Governance principles and ensures appropriate recording of minutes of the meetings.
With a view to leveraging technology and reducing paper consumption, the Company has adopted a web-based application for transmitting Board / Committee Agenda and Pre-reads. The Directors of the Company receive the Agenda and Pre-reads in electronic form through this application, which can be accessed through Internet or iPads. The application meets high standards of security and integrity that is required for storage and transmission of Board / Committee Agenda and Pre-reads in electronic form.
Independent Directors' Meetings
The Independent Directors meet at least once in a quarter, without the presence of Executive Directors or Management representatives. They also have a separate meeting with the Non-Executive Chairman, without any of the Executive Directors being present, to discuss issues and concerns, if any.
The Independent Directors met four times during the financial year ended 31st March, 2014 on 29th April, 2013, 26th July, 2013, 26th October, 2013 and 27th January, 2014. In addition to these formal meetings, interactions outside the Board meetings also take place between the Chairman and Independent Directors.
Board Induction and Training
Upon appointment, Directors receive a Letter of Appointment setting out in detail, the terms of appointment, duties, responsibilities and expected time commitments. Each newly appointed Director is taken through a formal induction programme. The Company Secretary provides new Directors, both Executive and Non-Executive, with a briefing on their legal and regulatory responsibilities as Directors and the Chief Executive Officer provides a briefing on Company's current structure and performance of business. The induction for Non-Executive Independent Directors include interactive sessions with Management Committee Members, Business and Functional Heads, visit to market / plant, etc.
The induction process for Directors is designed to:
• build an understanding of the Company, its businesses and the markets and regulatory environments in which it operates;
• provide an appreciation of their roles and responsibilities;
• fully equip them to perform their roles on the Board effectively;
• build links to Unilever's people and build an understanding of Unilever's key relationships.
Strategy Board meetings are held where Business and Functional Heads share with the Board their short term and long term plans, major activities, likely risks and challenges with actions to mitigate them in their respective areas. The Board's suggestions and comments are incorporated in the business plans of the Company.
The Board of Directors has adopted a policy on Board Evaluation. The policy provides for evaluation of the Board, the Committees of the Board and individual Directors, including the Chairman of the Board. As per the Policy, the Company will carry out an evaluation of the performance of the Board as a whole, Board Committees and Directors on an annual basis and the same will be facilitated by an independent consultant once in three years.
COMMITTEES OF THE BOARD
The Board Committees play a crucial role in the governance structure of the Company and have been constituted to deal with specific areas / activities which concern the Company and need a closer review. The Board Committees are set up under the formal approval of the Board to carry out clearly defined roles which are considered to be performed by members of the Board, as a part of good governance practice. The Board supervises the execution of its responsibilities by the Committees and is responsible for their action. The minutes of the meetings of all Committees are placed before the Board for review. The Board
Committees can request special invitees to join the meeting, as appropriate.
The Board has currently established the following statutory and non-statutory Committees.
The Company's Audit Committee comprises all the four Independent Directors. The Audit Committee is headed by Mr. Aditya Narayan and has Mr. S. Ramadorai, Mr. O. P. Bhatt and Dr. Sanjiv Misra as its members. During the year, upon retirement from the Board, Dr. R. A. Mashelkar ceased to be a member of the Committee. All the members of the Committee have relevant experience in financial matters.
The Audit Committee of the Company is entrusted with the responsibility to supervise the Company's internal controls and financial reporting process and inter aliaperforms the following functions:
• overseeing the Company's financial reporting process and disclosure of financial information to ensure that the financial statements are correct, sufficient and credible;
• recommending the appointment and removal of external auditors, fixation of audit fee and approval for payment of any other services;
• reviewing with management the quarterly and annual financial results before submission to the Board;
• reviewing with management the annual financial statements of the subsidiary companies;
• reviewing the adequacy of internal control systems with the management, external auditors and internal auditor;
• reviewing the adequacy of internal audit function;
• discussing with internal auditor any significant findings and reviewing the progress of corrective actions on such issues;
• reviewing the findings of any internal investigations by the internal auditor in matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and then reporting such matters to the Board;
• discussing with external auditors, before the audit commences, the nature and scope of audit as well as having post-audit discussions to ascertain areas of concern, if any;
• recommending the appointment and removal of cost auditors;
• reviewing the Company's financial and risk management policies;
• examining reasons for substantial default in the payment to Members (in case of non-payment of declared dividends) and creditors, if any;
• reviewing the progress made on cases that are reported under the Code of Business Principles and Whistle Blower Policy of the Company and the implication of these cases, if any, under the UK Bribery Act, 2011.
In addition to quarterly meetings for consideration of financial results, special meetings of the Audit Committee are convened. In these meetings, the Audit Committee reviews various businesses / functions, business risk assessment, controls and critical IT applications with implications of security and internal audit and control assurance reports of all the major divisions of the Company. The Audit Committee also reviews the functioning of the Code of Business Principles and Whistle Blower Policy of the Company and cases reported thereunder.
The meetings of Audit Committee are also attended by the Chief Executive Officer, Chief Financial Officer, Statutory Auditors and Internal Auditor as special invitees. The Company Secretary acts as the Secretary to the Committee. The minutes of each Audit Committee meeting are placed and confirmed in the next meeting of the Board. The Audit Committee also meets the internal and external auditors separately, without the presence of Management representatives.
The Audit Committee met six times during the financial year ended 31st March, 2014 on 29th April, 2013, 10th June, 2013, 26th July, 2013, 26th October, 2013, 14th December, 2013 and 27th January, 2014.
Internal Controls and Risk Management
The Company has robust systems for internal audit and corporate risk assessment and mitigation. The Company has an independent Control Assurance Department (CAD) assisted by dedicated outsourced audit teams.
The Internal Audit covers all the factories, sales offices, warehouses and centrally controlled businesses and functions, as per the annual plan agreed with the Audit Committee. The audit coverage plan of CAD is approved by the Audit Committee at the beginning of every year. Every quarter, the Audit Committee of the Board is presented with key control issues and actions taken on the issues highlighted in previous report.
Business Risk Assessment procedures have been set in place for self-assessment of business risks, operating controls and compliance with Corporate Policies. There is an ongoing process to track the evolution of risks and delivery of mitigating action plans.
Financial controls review procedures and guidelines are issued by Unilever annually in line with Sarbanes-Oxley (S. 404) requirements. Unit heads are responsible for implementing these procedures to confirm the effectiveness of the financial controls in that unit and to correct any instances of weaknesses identified. In addition, effectiveness of operational and non-financial controls is also reviewed by the unit heads. During the year, financial control environment was streamlined and strengthened with 50% of key controls being automated by further leveraging SAP. These procedures provide the management an assurance on the internal processes and systems.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee comprises Mr. S. Ramadorai as the Chairman and Mr. Aditya Narayan, Mr. O. P. Bhatt, Dr. Sanjiv Misra, Mr. Harish Manwani and Mr. Sanjiv Mehta as members of the Committee. During the year, upon retirement from the Board, Dr. R. A. Mashelkar ceased to be a member of the Committee. Consequent to his cessation from the Board of the Company, Mr. Nitin Paranjpe ceased to be a member of the Committee and Mr. Sanjiv Mehta was appointed as a member of the Committee with effect from 10th October, 2013.
The role of Nomination and Remuneration Committee is as follows:
• determining / recommending the criteria for appointment of Executive, Non-Executive and Independent Directors to the Board;
• determining / recommending the criteria for qualifications, positive attributes and independence of Directors;
• identifying candidates who are qualified to become Directors and who may be appointed in Senior Management and recommending to the Board their appointment and removal;
• reviewing and determining all elements of remuneration package of all the Executive Directors, i.e. salary, benefits, bonus, stock options, pension, etc.;
• reviewing and determining fixed component and performance linked incentives for Directors along with the performance criteria;
• determining policy on service contracts, notice period, severance fees for Directors and Senior Management;
• evaluating performance of each Director and performance of the Board as a whole;
The Committee also plays a role of a Compensation Committee and is responsible for administering the Stock Option Plan and Performance Share Plan of the Company and determining eligibility of employees for stock options.
The Nomination and Remuneration Committee met five times during the financial year ended 31st March, 2014 on 26th July, 2013, 18th September, 2013, 26th October, 2013, 20th February, 2014 and 11th March, 2014.
Board Membership Criteria
The Board of Directors is collectively responsible for selection of a member on the Board. The Nomination and Remuneration Committee of the Company follows a defined criteria for identifying, screening, recruiting and recommending candidates for election as a Director on the Board. The criteria for appointment to the Board include:
• composition of the Board, which is commensurate with the size of the Company, its portfolio, geographical spread and its status as a listed Company;
• desired age and diversity on the Board;
• size of the Board with optimal balance of skills and experience and balance of Executive and Non-Executive Directors consistent with the requirements of law;
• professional qualifications, expertise and experience in specific area of business;
• balance of skills and expertise in view of the objectives and activities of the Company;
• avoidance of any present or potential conflict of interest;
• availability of time and other commitments for proper performance of duties;
• personal characteristics being in line with the Company's values, such as integrity, honesty, transparency, pioneering mindset.
The reward philosophy of the Company is to pay market competitive reward with a strong linkage to performance. The reward philosophy is set forth into practice by various policies governing different elements of reward. The intent of all these policies is to ensure that the principles of reward philosophy are followed in entirety, thereby facilitating the Company to recruit and retain the best talent. It also ensures the effective recognition of performance and encourages a focus on achieving superior operational results.
The appointment of Executive Directors is by virtue of their employment with the Company as management employees and therefore, their terms of employment viz. salary, variable pay, service contract, notice period and severance fee, if any, are governed by the applicable policies at the relevant point in time. The reward of the Executive Directors is determined by the Nomination and Remuneration Committee. A fair portion of Executive Directors' total reward is linked to Company's performance. This creates alignment with the strategy and business priorities to enhance shareholder value. The total reward package for Executive Directors is intended to be market competitive with a strong linkage to performance in line with the Company's reward philosophy. The Company has introduced a policy on evaluation of all Directors. The outcome of such process would also be placed before the Nomination and Remuneration
Committee for its consideration before determining the reward for Executive Directors.
The Nomination and Remuneration Committee reviews the total reward annually, taking into account external benchmarks within the context of group and individual performance. In addition, the Company's Share Plans seek to reward Executive Directors by aligning their deliverables with shareholders' interests. Pursuant to the approval of Members at the Annual General Meeting held on 23rd July, 2012, the Company adopted '2012 HUL Performance Share Scheme' in place of the '2006 Performance Share Scheme'. The revised scheme provided for conditional grant of Performance Shares without charging premium to eligible management employees.
Non-Executive Independent Directors are eligible for sitting fees and commission not exceeding the limits prescribed under the Companies Act, 2013. The remuneration payable to Non-Executive Directors is decided by the Board of Directors subject to the overall approval of Members of the Company.
Independent Directors are currently paid sitting fees of Rs. 20,000/- for attending every meeting of the Board or Committee thereof. In line with the globally accepted governance practices, the Board of Directors adopted a 'Differential Remuneration Policy' for Non-Executive Directors' remuneration. As per the Differential Remuneration Policy, Non-Executive Independent Directors are entitled to fixed commission on profits at the rate of Rs. 15 lakhs for each financial year. In addition, Non-Executive Independent Directors are entitled to a remuneration linked to their attendance at the meetings of the Board or Committees thereof and also on the basis of their position in various Committees of the Board, whether that of a Chairman or a member of the Committee(s).
The remuneration payable to the Independent Directors under the Differential Remuneration Policy shall be within the overall limit of Rs. 150 lakhs, as approved by the Members at the Annual General Meeting held on 26th July, 2013. The criteria adopted by the Company for Differential Remuneration policy is as under:
The Non-Executive Directors, who continuously serve minimum two terms of five years each, are also entitled to one time commission of Rs. 10 lakhs at the time of stepping down from the Board.
During the year, there were no pecuniary relationships or transactions between the Company and any of its Non-Executive Independent Directors apart from sitting fees and commission. The Company has not granted any stock options to any of its Non-Executive Independent Directors. The Non-Executive Chairman of the Company does not receive any sitting fees, commission or stock options from the Company.
Stakeholders' Relationship Committee
The Stakeholders' Relationship Committee is comprised of Mr. O. P. Bhatt as the Chairman and Mr. Sanjiv Mehta and Mr. Sridhar Ramamurthy as members of the Committee. Consequent to his cessation from the Board of the Company, Mr. Nitin Paranjpe ceased to be a member of the Committee and Mr. Sanjiv Mehta was appointed as a member of the Committee with effect from 10th October, 2013.
The role of Stakeholders' Relationship Committee is as follows:
• considering and resolving the grievances of shareholders of the Company with respect to transfer of shares, non-receipt of annual report, non-receipt of declared dividend, etc.;
• ensuring expeditious share transfer process in line with the proceedings of the Share Transfer Committee;
• evaluating performance and service standards of the Registrar and Share Transfer Agent of the Company;
• providing guidance and making recommendations to improve service levels for the investors.
During the financial year ended 31st March, 2014, the Committee met twice on 10th June, 2013 and 17th February, 2014.
Corporate Social Responsibility Committee
The Corporate Social Responsibility Committee comprises Mr. O. P. Bhatt as the Chairman and Mr. Aditya Narayan, Dr. Sanjiv Misra, Mr. Sanjiv Mehta and Mr. Sridhar Ramamurthy as members of the Committee. Upon his retirement from the Board Dr. R. A. Mashelkar ceased to be a member of the Committee. Consequent to his cessation from the Board of the Company, Mr. Nitin Paranjpe ceased to be a member of the Committee and Mr. Sanjiv Mehta was appointed as a member of the Committee with effect from 10th October, 2013.
The role of Corporate Social Responsibility Committee is as follows:
• formulating and recommending to the Board Corporate Social Responsibility Policy and the activities to be undertaken by the Company;
• recommending the amount of expenditure to be incurred on the activities undertaken;
• reviewing the performance of the Company in the area of Corporate Social Responsibility;
• providing external and independent oversight and guidance on the environmental and social impact of how the Company conducts its business;
• monitoring Corporate Social Responsibility Policy of the Company from time to time.
During the financial year ended 31st March, 2014, the Committee met once on 14th December, 2013.
Share Transfer / Transmission Committee
The Share Transfer / Transmission Committee is formed as per the requirement of relevant rules exclusively to look into share transfer and related applications received from shareholders, with a view to accelerate the transfer procedures.
The Committee comprises three Directors of the Board. The Committee inter alia considers applications for transfer, transmission, split, consolidation of share certificates and cancellation of any share certificate in compliance with the provisions in this regard. The Committee is authorised to sign, seal or issue any new share certificate as a result of transfer, consolidation, splitting or in lieu of share certificates lost, defaced or destroyed.
The Committee meets at regular intervals to approve the share transfers and other related matters.
Committee for Allotment of Shares under ESOPs
The Committee for Allotment of Shares under ESOPs has been constituted as per the requirements of relevant regulations to expedite the process of allotment and issue of eligible shares to the employees of the Company under the Stock Option Plan of the Company.
The Committee comprises three Directors of the Board and is constituted for approval, issue and allotment of shares under ESOPs, pursuant to and in terms of '2001 HLL Stock Option Plan', '2006 HLL Performance Share Scheme' and '2012 HUL Performance Share Scheme'.
Independent Directors Committee for Open Offer
During the year, Unilever PLC, along with Unilever NV in its capacity as person acting in concert, made a Public Announcement for Voluntary Open Offer for acquiring 48.70 crore shares of the Company aggregating to 22.52% of the total Share Capital of the Company, from the public shareholders at the offer price of Rs. 600 per share. In line with the requirements of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the Board of Directors constituted a Committee of Independent Directors to provide reasoned recommendation to the Shareholders of the Company on the Voluntary Open Offer made by Unilever PLC and Unilever NV. The Committee comprised of Mr. Aditya Narayan as the Chairman of the Committee and Mr. S. Ramadorai, Mr. O. P. Bhatt, Dr. R. A. Mashelkar and Dr. Sanjiv Misra as members of the Committee.
The Committee met four times on 3rd May, 2013, 21st and 22nd May, 2013, 3rd June, 2013 and 10th June, 2013 and submitted reasoned recommendations to the Shareholders on 18th June, 2013. Being a special purpose Committee, the Committee was dissolved on conclusion of the Open Offer.
Other Functional Committees
Apart from the above statutory Committees, the Board of Directors has constituted the following Functional Committees to raise the level of governance as also to meet the specific business needs.
Routine Business Matter Committee
The Routine Business Matter Committee comprises three Directors of the Board and has been set up inter alia to oversee routine operations that arise in the normal course of the business, such as decision on banking relations, delegation of operational powers, appointment of nominees, etc. The Committee reports to the Board and the minutes of the meetings are placed before the Board for confirmation.
Committee for approving Disposal of Surplus Assets
The Committee for approving Disposal of Surplus Assets comprises three Directors of the Board. The Committee is entrusted with the responsibility of identifying the surplus assets of the Company and to authorise sale and disposal of such surplus property. The Committee is fully authorised to take necessary steps to give effect to sale and transfer of the ownership rights, interest and title in the said property, for and on behalf of the Company. The Committee reports to the Board and the minutes of the meetings are placed before the Board for confirmation.
Attendance of Directors at Board and Committee Meeting(s)
The following table shows attendance of Directors at the Board and Committee meeting(s) for the year ended 31st March, 2014. Attendance is presented as number of meeting(s) attended, (including meetings attended through Video Conferencing) out of the number of meeting(s) required to be attended.
Code of Business Principles
The Code of Business Principles (CoBP) is the Company's statement of values and represents the standard of conduct which all employees are expected to observe in their business endeavors. It forms the benchmark against which the world at large is invited to judge the Company's activities. The Code reflects the Company's commitment to principles of integrity, transparency and fairness. The copy of the Code of Business Principles is available on the website of the Company www.hul.co.in
The other things, sets out the rules for dealing with conflict of interest situations. The proposal for appointment of any Senior Management Personnel of the Company to serve as Director, Supervisory Director, Trustee, etc. on outside Board, whether for commercial ventures or for non-profit making bodies, is subject to prior internal approvals.
The Chief Executive Officer (CEO) through the Management Committee and Business / Unit Heads is responsible for ensuring that the Code is understood and implemented throughout the Company. The Code is also applicable to everyone with whom the Company is associated.
The complaints, issues and concerns received under the CoBP framework are duly investigated and reviewed by the CoBP Committee(s). Appropriate actions are taken after completion of investigation. The Company periodically cascades the principles embodied under CoBP across the organisation.
Preventing Conflict of Interest
The Board of Directors is responsible for ensuring that rules are in place to avoid conflict of interest by the Board members. The Board has adopted the Code of Conduct for the members of the Board and Senior Management Team. The Code provides that the Directors are required to avoid any interest in contracts entered into by the Company. If such an interest exists, the Directors are required to make disclosure to the Board and to abstain from discussion, voting or otherwise influencing the decision on any matter in which the concerned Director has or may have such interest. The Code also restricts Directors from accepting any gifts or incentives in their capacity as a Director of the Company, except what is duly authorised under the Company's Gift Policy.
The members of the Board and the Management Committee annually confirm the compliance of the Code of Conduct to the Board. The Code of Conduct is in addition to the Code of Business Principles of the Company. A copy of the said Code of Conduct is available on the website of the Company www.hul.co.in . In addition, members of the Board also submit, on an annual basis, the details of individuals to whom they are related and entities in which they hold interest and such disclosures are placed before the Board. Transactions with any of the entities referred above are placed before the Board for approval. Details of all related party transactions are placed before the Audit Committee on an annual basis.
Whistle Blower Policy
The Company has adopted a Whistle Blower Policy to provide appropriate avenues to the employees to bring to the attention of the management any issue which is perceived to be in violation of or in conflict with the fundamental business principles of the Company. The Company has provided dedicated e-mail addresses firstname.lastname@example.org and email@example.com for reporting such concerns. Alternatively, employees can also send written communications to the Company. The employees are encouraged to raise any of their concerns by way of whistle blowing and none of the employees have been denied access to the Audit Committee. The Company Secretary is the designated officer for effective implementation of the policy and dealing with the complaints registered under the policy. All cases registered under the Code of Business Principles and the Whistle Blower Policy of the Company, are reported to the Committee of Executive Directors and are subject to the review of the Audit Committee. The Whistle Blower Policy is available on the website of the Company www.hul.co.in
Share Dealing Code
In accordance with the Securities and Exchange Board of India (SEBI) (Prohibition of Insider Trading) Regulations, 1992, as amended, the Company has established systems and procedures to restrict insider trading activity and has framed a Share Dealing Code. The Share Dealing Code of the Company is an important governance code to prevent any insider trading activity by dealing in shares of the Company. The Code restricts the Directors of the Company and other specified employees to deal in securities of the Company on the basis of any unpublished price sensitive information, available to them by virtue of their position in the Company.
The objective of this Code is to protect the interest of shareholders at large, to prevent misuse of any price sensitive information and to prevent any insider trading activity by dealing in shares of the Company by its Directors and employees. The Code also prescribes sanction framework and any instance of breach of code is dealt with in accordance with the same. A copy of the Share Dealing Code of the Company is made available to all employees of the Company and compliance of the same is ensured. The Share Dealing Code is available on the website of the Company www.hul.co.in <http://www.hul.co.in>.
UN Global Compact
Unilever is a signatory to the United Nations Global Compact Programme and is fully committed to the principles of the UN Global Compact which cover human rights, labour practices, environment commitment and prevention of corruption in business organisations. The UN Global Compact is a symbol of leadership in a complex business world and provides a forward looking forum in which the United Nations, companies and civil society organisations can come together in an open and transparent dialogue. The Company's CoBP mechanism upholds these principles in all aspects of its business operations.
AFFIRMATION AND DISCLOSURE
All the members of the Board and the Management Committee have affirmed their compliance with the Code of Conduct as on 31st March, 2014 and a declaration to that effect, signed by the Managing Director and Chief Executive Officer (CEO), is attached and forms part of this Report.
There were no materially significant related party transactions, pecuniary transactions or relationships between the Company and its Directors for the financial year ended 31st March, 2014 that may have a potential conflict with the interests of the Company at large.
All details relating to financial and commercial transactions where Directors may have a pecuniary interest are provided to the Board and the interested Directors neither participate in the discussion nor vote on such matters.
Transactions with related parties, as per requirements of Accounting Standard 18, are disclosed in this Annual Report and they are not in conflict with the interest of the Company at large.
DISCLOSURE OF PENDING CASES / INSTANCES OF NON-COMPLIANCE
There were no instances of penalties and strictures imposed on the Company by the Stock Exchanges or SEBI or any other statutory authority on any matter related to the capital market during the last three years.
During the year, the Company has received a Show Cause Notice from the Securities and Exchange Board of India (SEBI) for alleged violation of the provisions of Regulation 8(3) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (SAST Regulations, 1997) with respect to delay in filings in the year 2008 and 2010. The Company has filed an application for compounding the matter with SEBI on 11th February, 2014 and the matter is pending with SEBI for decision on the compounding application.
The Company has been impleaded in certain legal cases related to disputes over title to shares arising in the ordinary course of share transfer operations. However, none of these cases are material in nature, which may lead to material loss or expenditure to the Company.
COMPLIANCE WITH THE GOVERNANCE FRAMEWORK
The Company is in compliance with all mandatory requirements of Clause 49 of the Listing Agreement. In addition, the Company has also adopted the non-mandatory requirements of constitution of the Remuneration Committee and establishing of Whistle Blower mechanism.
SECRETARIAL STANDARDS AND SECRETARIAL
The Company has undertaken Secretarial Standards Audit for the year 2013-14 for audit of secretarial records and procedures followed by the Company in compliance with relevant Secretarial Standards issued by the Institute of Company Secretaries of India. The Secretarial Standards Audit Report is given on page no. 74 of this Report.
The Company has also undertaken Secretarial Audit for the year 2013-14 which, inter alia, includes audit of compliance with the Companies Act, 1956, and the Rules made under the Act along with applicable Sections of the Companies Act, 2013, notified on 12th September, 2013, Listing Agreement and Regulations and Guidelines prescribed by the Securities and Exchange Board of India. The Secretarial Audit Report is given on page nos. 74 and 75 of this Report.
Annual General Meeting 2014
Date : Monday, 30th June, 2014
Venue :Unilever House, B.D. Sawant Marg, Chakala, Andheri (East), Mumbai - 400 099
Time : 2.00 p.m.
Last Date of receipt of Proxy Forms :Saturday, 28th June, 2014 before 2.00 p.m. at the Registered Office of the Company.
Calendar of financial year ended 31st March, 2014
The meetings of Board of Directors for approval of quarterly financial results during the financial year ended 31st March, 2014 were held on the following dates:
First Quarter Results 26th July, 2013
Second Quarter and Half yearly Results 26th October, 2013
Third Quarter Results 27th January, 2014
Fourth Quarter and Annual Results 28th April, 2014
Tentative Calendar for financial year ending 31st March, 2015
The tentative dates of meeting of Board of Directors for consideration of quarterly financial results for the financial year ending 31st March, 2015 are as follows:
First Quarter Results 28th July, 2014
Second Quarter and Half yearly Results 27th October, 2014
Third Quarter Results 27th January, 2015
Fourth Quarter and Annual Results 27th April, 2015
The Board of Directors at their meeting held on 28th April, 2014, recommended a Final Dividend of Rs. 7.50 per equity share of face value of Re. 1/- each, for the financial year ended 31st March, 2014. Together with Interim Dividend of Rs. 5.50 per equity share paid on 15th November, 2013, the total dividend for the year works out to Rs. 13.00 per equity share of face value of Re. 1/- each. Final Dividend, if approved by Members, will be paid on or after 4th July, 2014.
As per the Companies Act, 1956, dividends that are unclaimed for a period of seven years, statutorily get transferred to the Investor Education and Protection Fund (IEPF) administered by the Central Government and thereafter, cannot be claimed by investors. To ensure maximum disbursement of unclaimed dividend, the Company sends reminders to the concerned investors, before transfer of dividend to IEPF.
The unpaid / unclaimed dividends upto Final Dividend 1995 (39F) had been transferred to the General Revenue Account of the Central Government. The Investors, who have not claimed their dividend for the said period till date, may claim the amount from the Registrar of Companies, Mumbai. Apart from above, the Company has transferred the unpaid dividends upto Interim Dividend of 2006 (51I) to the IEPF. The unclaimed Final Dividend 2006 (i.e. 51F), Interim Dividend of 2007 (i.e. 52I) and Special Dividend of 2007 (52S), is due for transfer in June 2014, August 2014 and November 2014 respectively. In view of this, the Members of the Company, who have not yet encashed their dividend warrant(s) may write to the Company immediately.
Mergers and Demergers
The details of Mergers and Demergers with Companies and respective share exchange ratios are available on "Investor Centre" page on the website of the Company www.hul.co.in.
The details of Plant Locations are available on page nos. 166 and 167 of this Report.
COMMUNICATION TO SHAREHOLDERS
Effective communication of information is an essential component of corporate governance. It is a process of sharing information, ideas, thoughts, opinions and plans to all stakeholders which promotes management-shareholder relations. The Company regularly interacts with shareholders through multiple channels of communication such as results announcement, annual report, media releases, Company's website and subject specific communications.
The quarterly, half yearly and annual results of the Company's performance are published in leading newspapers such as Times of India and Maharashtra Times. These results are also made available on the website of the Company www.hul.co.in <http://www.hul.co.in>. The website also displays vital information relating to the Company and its performance, official press releases and presentation to analysts. The Company also sends quarterly, half yearly and annual results as well as the notice of the Board Meeting to Members on e-mail.
The Investor Centre of the Company's website provides more than 50 Frequently Asked Questions on various topics related to transfers and transmission of shares, dematerialisation, nomination, change of address, loss of share certificates, dividend and sub-division of share certificates. In addition, various downloadable forms required to be executed by the shareholders have also been provided on the website of the Company.
The Quarterly Results, Shareholding Pattern and all other corporate communication to the Stock Exchanges are filed through NSE Electronic Application Processing System (NEAPS) and BSE Listing Centre, for dissemination on their respective websites.
Web-based Query Redressal System
Members may utilise the facility extended by the Registrar and Transfer Agent for redressal of queries. Investors may visit <http://karisma.karvy.com> and click on "INVESTORS" option for query registration through free identity registration process.
Investors can submit their query in the "QUERIES" option provided on the above website, which would give the grievance a registration number. For accessing the status / response to the query submitted, the grievance registration number can be used at the option "VIEW REPLY" after 24 hours. Investors can continue to put an additional query relating to the case till they get a satisfactory reply.
Investors can provide their feedback on the services provided by the Company and its Registrar and Transfer Agent by filling the Shareholder Satisfaction Survey form available in Investor Centre on website of the Company at www.hul.co.in <http://www.hul.co.in>. The Shareholder Satisfaction Survey form is also given at the end of this Report.
Alternative Dispute Redressal
Long pending litigations involve significant investment as monetary value of the disputed shares and accrued dividends / other benefits are locked up unutilised till the dispute is settled. Further, in terms of the requirements of the Companies Act, 1956, such dividends / other specified incomes remaining unclaimed / unpaid for a period of seven years are to be credited to the Investor Education and Protection Fund and the Shareholders are not entitled to claim the same thereafter.
Keeping the above in mind, the Company in 2004, pioneered the mechanism of providing an alternate dispute redressal for Shareholders to resolve the shares related disputes pending before the courts / authorities by amicable settlement. The Company had started this unique initiative of organising Alternative Dispute Redressal meetings wherein aggrieved investors come face to face and get a chance to settle their disputes, some of which were pending for years.
The first of such meeting was held in Ahmedabad in 2005 wherein 14 cases were resolved by amicable settlement. Similar such meetings were held in other cities like Mumbai and Kolkata wherein 31 more cases were resolved to the satisfaction of the parties to the dispute. The Company engaged the services of retired Judges to preside over the meeting in order to give a fair view to each case.
A number of Shareholders have availed the benefit of this process and the Company through its various initiatives keeps exploring the possibilities of settling such issues. The process helps the investors in releasing the locked up investment and save their time consumed in contesting legal proceedings. The objective of this process is to facilitate quick resolution of the dispute between the parties.
The Shareholders who are willing to avail the benefits of Alternative Dispute Redressal mechanism may approach the Investor Service Department of the Company at the Registered Office of the Company.
Consumers / Customers
In line with one of the Company's key tenets of Consumer and Customer Centricity, the Company commenced a process of resolving consumer and customer disputes and grievances through an alternative disputes redressal mechanism. The Company appointed four retired Judges of different High Courts, one in each region, to act as Ombudsman to hear the Company's consumers and customers in a bid to resolve long pending disputes. The Ombudsman independently reviews the merits of the complaint and decides on the issue. The Company has taken the view that the decision arrived at such disputes resolution meetings, while being fully binding on the Company, may not be binding on its consumers and customers and if they choose to continue with litigation, they are free to do so. These meetings were held in all the four regions and achieved reasonable success. The Company believes that such independent dispute resolution mechanism will further reinforce its commitment and credibility with its consumers and also set new benchmarks for the industry.
The Company has also set a consumer care helpline 'Levercare', to help consumers reach the Company for their grievances, suggestions, ideas and to help brands reach out to consumers.
Address for Correspondence
All shareholders' correspondence should be forwarded to M/s. Karvy Computershare Private Limited, the Registrar and Transfer Agent of the Company or to the Investor Service Department at the Registered Office of the Company at the addresses mentioned below.
The Company's dedicated e-mail address for Investors' Complaints and other communications is firstname.lastname@example.org
Karvy Computershare Private Limited
Unit : Hindustan Unilever Limited Plot No. 17 to 24, Vittal Rao Nagar, Madhapur, Hyderabad - 500 081 Phone : +91 - 40 - 23420815 - 824 Fax :+91 - 40 - 23420814 E-mail : email@example.com .
firstname.lastname@example.org . Website : www.karvy.com .
Investor Service Department
Hindustan Unilever Limited Unilever House, B. D, Sawant Marg, Chakala, Andheri (East), Mumbai - 400 099
Phone : +91 - 22 - 39832285 / 32452 Fax : +91 - 22 - 28249457 E-mail : email@example.com . Website : www.hul.co.in .
Mr. Dev Bajpai
Executive Director (Legal & Corporate Affairs) and Company Secretary E-mail : firstname.lastname@example.org
Phone : +91 - 22 - 39832557 / 32358 / 32532 / 32312